Managing garnishments can be quite complex for payroll professionals, from understanding your employer’s legal obligations, to determining what payments are subject to garnishment and how much can be withheld, etc. It's also important for you, the employee, to get educated on how and why payroll garnishments can occur.
Please note the following is for informational purposes and does not constitute legal advice.
What is a garnishment in payroll?
According to BDO, a payroll garnishment is when a debtor doesn’t pay a debt, a creditor may try to access money owed to the debtor by someone else. The creditor can do this through a process called garnishment.
This can be done through a wage garnishment, which is when an employer takes money out of an employee’s paycheque and sends it to the employee’s creditor. However, in order for the creditor to establish that the debt is owed, the creditor must go to court and get a judgment against the debtor.
Each province has different rules on which assets the creditor can take to satisfy a debt, click here for links to each provinces legislation and their respective exemptions on garnishments.
The Employee Guide to Garnishees
Are you an employee that has been served with a garnishing order?
If you have been served with a garnishing order, according to Dial-A-Law you have two options:
- You could pay into court whatever amount you owe the debtor (up to the amount claimed in the garnishing order). Whatever amount you pay into court you don’t have to pay to the debtor.
- Your second option, if you believe you don’t owe the debtor anything, is to file a “dispute note” in court. This note explains why you don’t owe the debtor anything. It doesn’t have to be on a particular form; it can be on your letterhead. If the creditor disagrees with you, then a judge will decide the matter.
These options are specific to legislation in British Columbia. For other jurisdictions, please see legislation links below.
It is important to keep in mind that you should never ignore a garnishing order served on you. There are serious consequences for not complying with a court order.
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The Employer Guide to Garnishees
Are you an employer who just received a notice that you need to garnish an employee's wages?
According to Intuit QuickBooks, the garnishment process begins with an official order that is served to your business related to the garnishment. This letter will contain how much your employee owes, how to calculate the garnishment, and instructs you where to send the funds. When it is time to calculate payroll, you determine how much your employee earned and then subtract the amount for the wage garnishment, and draft your employee a cheque for the remainder. Once this is completed, you send the garnished amount as instructed within your letter.
However, there are two situations where a wage garnishment does not require a court order:
- If an employee borrows money from a credit union, they will have typically signed an assignment of wages agreement. In this agreement, they have agreed to have the debt taken from their wages, therefore the credit union doesn't have to get a court order to start the garnishment process.
- If an employee has back taxes, the Canada Revenue Agency can initiate a wage garnishment without a court order.
If you do receive an official notice that you need to garnish an employee's wages, you must follow through with the demands of the letter.
Legislation Surrounding Payroll Garnishees
When looking at the legislation surrounding payroll garnishees, the amount of wage garnishment varies based on the amount of debt and the rules in your province. Each provincial exemption indicates the amount that an employee is not liable to pay from their net wages or salary. By understanding the rules of your province or territory, you will have a better understanding of your rights either as an employer or an employee.
Learn more about each province and/or territory:
In British Columbia, 70% of wages are exempt. However, the exempt amount cannot be less than $100 for an employee with no dependents and $200 for a person with one or more dependents. For all the legislation surrounding payroll garnishees in British Columbia, please click here.
In Alberta, 50% of wages are exempt above the minimum exemption of $800 (with a maximum of $3200), plus $200 for each dependent. For all the legislation surrounding payroll garnishees in Alberta, please click here. (Section 40.2).
In Saskatchewan, 70% of wages are exempt over the minimum exemption threshold of $1500 per month plus $350 for each dependent. For all the legislation surrounding payroll garnishees in Saskatchewan, please click here. (Section 23.7).
In Manitoba, 70% of wages are exempt. However, the exempt amount cannot be less than $250 for an employee with no dependents and $350 for an employee with dependents. For all the legislation surrounding payroll garnishees in Manitoba, please click here. (Section 5).
In Ontario, 80% of wages are exempt, unless otherwise ordered by a judge. For all the legislation surrounding payroll garnishees in Ontario, please click here. (Section 7).
In Québec, the exempt amount is determined by a formula laid out in Section 698 of the Code of Civil Procedure. To summarize this section, the percentage that can be garnished is 30%, therefore 70% of wages are exempt. For all the legislation surrounding payroll garnishees in Québec, please click here.
Newfoundland and Labrador
In Newfoundland and Labrador, employees with no spouse, no co-habiting partner, and no dependents: $649-Employees supporting one or more dependents, $963, plus $47 for each additional dependent-Employees supporting a spouse or co-habiting partner: $1,019-Employees supporting a spouse or co-habiting partner and one dependent: $1,059, plus $47 for each additional dependent. For all the legislation surrounding payroll garnishees in Newfoundland and Labrador, please click here.
In New Brunswick, wage garnishments are not permitted. For all the legislation surrounding payroll garnishees in New Brunswick, please click here. (Section 31).
Unless otherwise stated in the execution order, 50% of gross wages are exempt. The amount deducted from an employee cannot go under $450 if they are supporting a dependent, nor $330 for any other debt being collected. For all the legislation surrounding payroll garnishees in Nova Scotia, please click here. (Section 79.08).
Prince Edward Island
In Prince Edward Island, the exemption is determined by the court based on an employee's financial needs and the number of dependents. For all the legislation surrounding payroll garnishees in Prince Edward Island, please click here.
In Yukon, 70% of net wages are exempt. However, the amount exempted cannot be less than $600 per month for a single employee. For employee supporting one to three dependents, the monthly exemption must not be less than $1,000. If an employee is supporting at least four dependents, the fourth dependent will increase the minimum monthly exemption by $150 per month and then each additional dependent will increase the amount beyond that. For all the legislation surrounding payroll garnishees in Yukon, please click here. (Page 12, under wage exemption).
In the Northwest Territories, 70% of net wages are exempt. For all the legislation surrounding payroll garnishees in the Northwest Territories, please click here. (Section 7 (2)).
In Nunavut, 70% of wages are exempt per month, with a maximum of $3500 per month plus $3000 per dependent. This is over the minimum exemption threshold income of $1500 per month plus $300 per dependent. For all the legislation surrounding payroll garnishees in Nunavut, please click here. (Section 6).
Additional Canadian Payroll Garnishment Resources